Council remains confident in investment in Together Energy despite growing condemnation

WARRINGTON Borough Council says it remains “confident” in its controversial investment in green energy company Together Energy following a near-reported £4m loss – which the company has described as a profit.

Together Energy, a UK supplier of low-cost domestic green energy, and 50pc owned by the borough council reported a rise in turnover and an EBITDA profit of £1.6m in its latest set of filed accounts for the year ended 31 October 2020.
The company says it has correctly reported being in profit, and continues to be, as the company reports its financial results on an EBITDA basis, which is earnings before interest, taxes, depreciation and amortisation.
Recording year on year growth since the business was established just five years ago, turnover has grown to £92.2m* and it currently has 288,478 customer accounts.
In September 2020 prior to the end of its financial year Together Energy, which is supported by investment from Warrington Borough Council, acquired the residential customer base of Bristol Energy, comprising 144,239 accounts, for £14m, doubling the size of the business.
Despite the ongoing challenges of the pandemic, the financial performance is stronger than forecast which Founder and CEO Paul Richards says is a significant vote of confidence in the company’s unique ethically responsible business model of employing people from the most vulnerable backgrounds, living in postcodes identified within Scottish Index of Multiple Deprivation, a policy which is replicated within the company’s Warrington office.

Mr Richards said, “We’ve had an exceptional year in so many ways and we are very proud, as are our partners Warrington Borough Council, of our achievements as we continue to operate in challenging circumstances, both with the ongoing impact of the pandemic and industry pressures including rises in wholesale prices and regulatory volatility including payment holidays for some customers.
“Throughout this our commitment to creating meaningful jobs and careers has continued and we are actively recruiting for 80 customer service roles, both in Clydebank and Warrington, funded by the Kickstart scheme, part of the UK Government’s initiative to support young people who are claiming Universal Credit.
“We have also extended our Modern Apprenticeship Scheme and are delighted to have two team members, who had no prior qualifications before starting with the business, graduate from Strathclyde University with business degrees. A similar scheme is also being replicated with the University of Chester.
“Our investment into our infrastructure has also accelerated, as we migrated Bristol Energy customers into the business, with an enhanced billing system, new website and customer portal, which have all helped significantly improve customer review scores.”
Mr Richards added, “Although improving customer service is embedded throughout the business and an ongoing commitment, these achievements are hugely significant when we are supporting staff, with limited qualifications or business experience, in a very complex industry, and should not be underestimated.”
But local resident Richard Buttrey, who put in an objection to the council’s accounts, causing the delay in them being signed off, remains critical of the investment and has raised various concerns, including comments from council leader Cllr Russ Bowden last March, that TE was “delivering a positive financial return.”
He said: “Together Energy say in their 2019/20 accounts that no dividend has been paid, yet Cllr. Bowden, reported in March, said Together Energy (TE) was “delivering a positive financial return to the Council”.
“Cllr. Bowden is simply wrong. By law TE can’t pay a dividend and make a return to WBC until they have accumulated a profit and it could take many years to break even once they start to earn profits and recoup the losses to date of £23m. Only then will the council start to see a return. In fact TE is costing the council money since it is paying interest on the loan which is financing the TE investment.
“Cllr. Bowden also said TE had delivered their first profit for 2019/2020. That’s also wrong. TE have published a loss and that’s what the auditors have certified. In their accounts published last week WBC also confirm a loss for TE.
“TE have said that if interest charges and tax along with charges for depreciation on assets are ignored then TE would be in profit. Well of course if some costs are ignored you can produce whatever number you want. It doesn’t mean a loss suddenly becomes a profit. Neither is such a measure (known as EBITDA – Earnings Before Interest Tax Depreciation Amortisation) within the internationally recognised GAAP (Generally Accepted Accounting Principle) for reporting profits. The man on the Manchester Metro knows full well that his discretionary income after tax and all basic living costs is not magically greater if he ignores his mortgage payments.
“When a company starts to measure profitability with EBITDA when it hasn’t done so in the past it becomes creative accounting and a red flag should be raised.
“It’s often the case that they have large borrowings or are experiencing rising capital or development costs. It seems to me this is precisely the situation in which TE finds itself since the 7% preference dividends owed to WBC, along with additional loans and guarantees WBC have granted is a big drain on profits.”
An opposition party conservative spokesman said: “ The latest statutory accounts of Together Energy clearly show a loss at profit before tax of some £4.2 million and a loss after tax of some £3.8 million these are not the results of a profitable company. To the 31st of October 2020 Together Energy had accumulated losses of £23 million. The Conservative group continue to remain extremely concerned about the substantial investments that Warrington Borough Council have made in this energy company.
“The performance of Together Energy was challenged by Conservative members at the recent Audit and Corporate Governance Committee meeting held on the 22nd of July, concerns were raised about the underlying performance of the company and the likelihood of any dividends being received by the council from its £18M preference share investment. Along with concerns over the wisdom of the councils significant exposure to the loss-making Together Energy reported at some £41.2 million. The latest results only reinforce the Conservatives Groups very serious concerns over the Councils investments and its exposure to Together Energy.”
Meanwhile, The Liberal Democrats on the borough council also remain critical of the way Together Energy is making out it is in profit when it is not.
Finance spokesperson Cllr Ian Marks said: “Right from the start we have been critical of the Council’s investment in this company. You cannot argue with the aims of the partnership being to address the climate emergency, tackle fuel poverty and create job opportunities in the town particularly for young disadvantaged people. The other aim is to generate income for the Council but this has not yet happened.
“The issue is whether a Council should be making investments of this nature. Investments in energy companies by other local authorities like Nottingham, Bristol and Portsmouth, have gone badly. The Council always claims this investment is different because it is investing in a company with expertise rather than setting up a company from scratch. We are not convinced. There is also the mixed record of customer satisfaction with Trust Pilot giving a 55% ‘bad’ rating.
“For the company to claim it was in profit for the financial year to October 2020 is downright misleading. There may have been a surplus of £1.6m before ‘interest, taxes, depreciation and amortisation’ but the true figure after these deductions is a loss of nearly £4m. For a representative of the company to claim this is a ‘significant profit achievement’ is simply not acceptable.”
A Warrington Borough Council spokesperson said: “The profit figure previously referred to was the EBITDA position (Earnings Before Interest Tax Depreciation Amortisation) of Together Energy, which is a common measure used in business planning.
“A positive financial return was recorded in our accounts for 2019/20 and 2020/22 which incorporates the accrual of the preference share payments and interest earned by the council on loans to Together Energy.
“We remain confident in our investment with Together Energy and the growth in customer numbers is very encouraging, as is the overall year-on-year growth and performance of the company.
“The governance processes we followed to set up Together Energy, and its ongoing monitoring, has recently been positively assessed by an independent review of council governance by PwC.
“We are also pleased that Together Energy is playing an important role as one of several initiatives that we have implemented to address the climate emergency agenda, supplying 100% green energy to customers.”

*In 2019 the company recorded a turnover of £88m and the accounting period was over 14 months rather than twelve months. Pro rating the previous period to 12 months on a like for like basis would result in 22.7% turnover growth.